Stock Market Predictions

Talbots rises on possible private equity interest

Stock Market Predictions

Talbots' advisor -- Perella Weinberg -- has started actively soliciting bids for the company, and Golden Gate Capital, which is active in the retail sector, is considering a bid, a source familiar with the matter told Global Markets.

Golden Gate and TPG Capital are among the firms weighing bids for Talbots, CNBC reported earlier in the day.

In December, Talbots said it would look at its options after rejecting a $3-per-share offer from private equity firm Sycamore Partners -- also its largest shareholder with a 9.9 percent stake.

Sycamore is headed by Stefan Kaluzny, a former managing director at Golden Gate.

Talbots did not immediately reply to Global Markets' request for comment, but said in a statement that it will not comment on the market activity in its stock.

Golden Gate and TPG declined to comment when contacted by Global Markets.

The Hingham, Massachusetts-based retailer has been looking for a new chief executive to replace Trudy Sullivan, who unsuccessfully tried to revive the chain with new store formats, cost cuts and by chasing a younger clientele.

The company's shares were trading up about 19 percent at $3.19 on Friday on the New York Stock Exchange. They touched a high of $3.29 earlier.

(Reporting by Greg Roumeliotis in New York, Ranjita Ganesan and Mihir Dalal in Bangalore; Editing by Roshni Menon)

Sonoco cuts Q4 profit outlook on weak demand

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The company said it is implementing additional restructuring actions to cut costs and keep them in line with lower demand.

In the quarter, the company, which makes consumer and industrial packaging products, expects to record an after-tax charge of 10 cents a share from its previously announced and additional restructuring actions in the quarter.

Sonoco now expects fourth-quarter adjusted earnings of 45 cents to 47 cents a share, down from its prior forecast of 59 cents to 63 cents a share.

Earlier this week, peer MeadWestvaco Corp (MWV.N) warned of lower volumes and production in the fourth quarter.

Sonoco said demand dropped off in the last six weeks of the October-December period. The company took down its North American paperboard mill system for about 178 machine operating days during the quarter.

Tube and core volumes fell 7 percent in North America and in Europe, on a same-day basis, the company said in a statement.

Sonoco also narrowed its 2011 earnings forecast to $2.28 to $2.30 per share, from $2.41 to $2.46 per share.

The company plans to change the number of reporting segments to four from three, starting from the fourth quarter, following its $550 million acquisition of protective-packaging maker Tegrant Corp last year.

The company expects to announce the fourth-quarter results on February 9.

Shares of the Hartsville, South Carolina-based company were down 4 percent at $32.34 in early trading on the New York Stock Exchange. Earlier in the session, they touched a one-month low of $32.10.

(Reporting by Ritika Rai in Bangalore; Editing by Maju Samuel)

Google shares slide but analysts stay upbeat

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The search giant underperformed on both revenue and earnings, despite record U.S. online commerce during the holiday season, prompting several brokerages to cut their price targets on the stock.

Google shares were down $50.77 at $588.80 in late morning trade on Friday on the Nasdaq. They had touched a low of $584.81. It was the stock's biggest percentage fall in 9 months.

About 5.2 million shares changes hands by 1120 ET, more than their daily average volume.

The broader Nasdaq composite index was down 0.25 percent.

Google executives blamed the decline in search ad rates on forex fluctuations and ad format changes but analysts wondered whether mobile advertising -- which has lower rates -- played a more important role than the company admitted.

The fall in cost per click (CPC) had led to a barrage of questions from analysts during the post-earnings conference call on Thursday.

The market needs to shift expectations to paid click growth and lower its estimates for CPC, Goldman Sachs analysts said in a note.

Google's heavy investments in mobile and social network initiatives -- to stave off competition from rivals Apple Inc and Facebook -- and its planned $12.5 billion acquisition of smartphone maker Motorola Mobility Holdings have also raised investors' concerns.

Larry Page, who took over as CEO in April, said in July that the company was moving to put "more wood behind fewer arrows."

Analysts said the company has seen growth in display advertising, its Android mobile platform and Google+.

Google+ -- its recently-launched social network -- has 90 million users now, up from 40 million three months ago.

SOLID CORE

Wall Street analysts called the selloff an overreaction; Barclays said it presents a buying opportunity.

"Don't judge a book by its cover," Goldman Sachs titled its research note on Google.

The company's core results were solid as paid click growth accelerated by more than a third, margins improved, and display and mobile businesses performed well, analysts said.

The acceleration in paid clicks suggests that underlying demand for Google ads is quite healthy across devices, JP Morgan said, adding Google is best-positioned for the shift to new media.

Goldman Sachs analysts said, "We expect the growth in mobile to be 146 percent in 2012 and represent 15 percent of gross sales as we exit fourth-quarter of 2012."

The company still has strong earnings power that will reappear during 2012, Canaccord Genuity said, reiterating its "buy" rating.

Barclays, Baird, Jefferies and JP Morgan also maintained their top ratings on the stock.

(Reporting by Aditi Sharma and Soham Chatterjee in Bangalore; Editing by Tenzin Pema, Don Sebastian, Unnikrishnan Nair)

SunTrust, Fifth Third net rises but paths diverge

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Atlanta-based SunTrust, the largest bank based in the southeastern United States, said a 3 percent rise in its business and corporate loan portfolio and a $60 million one-time benefit from freezing its company pension plan helped results.

SunTrust earned $152 million, or 28 cents a share, in the last quarter of 2011 compared with $114 million, or 23 cents a share, a year ago. It beat the 27 cent-per-share consensus estimate of analysts surveyed by Thomson Global Markets I/B/E/S, sending its stock price up 4.6 percent to $21.17 in afternoon trading.

The bank, which has been long battered by its Florida and Georgia home mortgage portfolios, set aside a much lower reserve for credit losses than a year ago and said net interest income rose 2 percent.

It set aside $215 million, however, to cover expected demands from government-sponsored mortgage companies Fannie Mae and Freddie Mac to repurchase loans whose credit quality the bank may have misrepresented. Such demands will continue at elevated levels in the first half of 2012, but should diminish as inventories of subprime loans related to the bottom-of-the-barrel 2006-2008 lending cycle are worked through, bank executives said.

SunTrust's backlog of underwater homes continues to hurt revenue due to insurance, maintenance and other foreclosure costs, and could escalate if the housing market recovery proves temporary, executives warned. "We don't know where this is going," SunTrust Chief Financial Officer Aleem Gillani said on a conference call with analysts. "We're leveraged to the economy."

Unlike larger rivals such as US Bancorp (USB.N) and PNC Financial Services Group (PNC.N), SunTrust did not set aside money to resolve claims of robo-signing and other mortgage-servicing abuses. Fourth-quarter losses related largely to servicing grew by $70 million from the prior year. The bank recently began discussions with state attorneys general on a settlement and said it will update shareholders on expected settlement charges in coming months.

SunTrust also spent $20 million to lay off employees in the quarter and reserved $27 million for additional severance costs. The bank said it is on target to meet its goal of cutting $300 million of annual expenses by the end of 2013, but analysts at Stifel Nicolaus said in a report that the company has a weak history of meeting its expense goals. They estimated that SunTrust earned only 17 cents a share in the quarter, excluding one-time items.

SunTrust Chief Executive William Rogers said the company's capital levels are strong enough to warrant more stock repurchases this year, pending approval of its stress-test scenario from banking regulators.

FIFTH THIRD's MISS

Fifth Third, a Cincinnati-based bank with operations in the Midwest and Southeast, said fourth-quarter net income rose 13 percent from a year earlier to $305 million, or 33 cents a share.

Analysts, who according to Thomson Global Markets I/B/E/S had an average forecast of 36 cents a share, said despite relatively strong loan growth the bank's expenses were high.

Shares of Fifth Third were trading down 4 percent at $13.02 on Friday afternoon.

In a conference call with analysts, Fifth Third Chief Executive Kevin Kabat attributed higher costs in part to seasonal factors such as higher federal unemployment insurance taxes and bonuses to mortgage bankers who have been increasing sales.

"We posted very strong loan growth for the quarter," Kabat said, noting that business, mortgage and auto lending is expected to continue growing this quarter.

Fifth Third said it hopes to use excess capital to expand within its current markets through mergers and acquisitions if prices sought by sellers fall by year-end. "We expect some M&A opportunity in 2012," Kabat said, "but don't expect it to happen in the near term."

Like many of their rivals, executives of SunTrust and Fifth Third said they may tweak consumer fees upward to mitigate the effects of low interest rates on loans and investments, and to offset new regulations that cap fees they can collect from merchants on debit card transactions.

"We are earning next to nothing on our deposits, which is a large source of value for a banking company," Fifth Third investor relations head Jeff Richardson said on the conference call.

(Reporting by Jed Horowitz and David Henry, editing by Matthew Lewis)

GE revenue lower than expected

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But the largest conglomerate held to its forecast of double-digit profit growth this year, saying that it would expand in rapidly growing economies and cut costs in Europe, particularly at its health care arm.

Revenue fell 7.9 percent to $37.97 billion, down from $41.23 billion and below the $40.03 billion analysts had expected. Factoring out the effects of last year's sale of a majority stake in NBC Universal revenue would have been up 4 percent.

In addition to general European weakness, sales of appliances were off, with the home and business solutions division that sells them recording a 4 percent revenue drop.

Sales at GE's energy division, which makes products ranging from electric turbines to equipment used in oil production, were up 19 percent in the quarter, slightly below the company's expectations as some deliveries were shifted out of the fourth quarter into 2012, executives said.

"There are a few challenged markets, like Europe and appliances, but on balance we have a positive outlook," Immelt told investors on a conference call, where he also reiterated the Fairfield, Connecticut-based company's forecast for double-digit earnings growth this year.

The revenue miss concerned investors, overshadowing a penny-per-share earnings beat and sending GE shares down 0.1 percent to $19.13 on the New York Stock Exchange.

This miss is the latest blow for Immelt, who has seen GE shares generally lag the U.S. stock market during his decade as CEO. In the fall of 2007, GE shares briefly topped $40.50, where the stock had closed before Immelt's storied predecessor Jack Welch handed off the reins. Today the shares trade at less than half that price.

Over the past year, GE shares are up 4.5 percent, lagging the 6.8 percent rise of the Dow Jones industrial average .DJI but ahead of the 2.5 percent rise of the broader Standard & Poor's 500 index .SPX.

"We're concerned about the revenue miss," said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York. "That's really what we're focused on this earnings season. We're not so concerned about being a penny above or below expectations, because that can be handled with accounting."

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For a graphic on GE: link.reuters.com/kun26s

For a graphic on industrial-sector earnings:

r.reuters.com/van26s

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MARGINS IMPROVE

The world's biggest maker of jet engines and electric turbines said net income from continuing operations rose 0.6 percent to $3.93 billion, or 37 cents per share, compared with $3.90 billion, or 36 cents per share, a year ago.

Factoring out one-time items, profit came to 39 cents per share, above the 38 cents analysts had forecast, according to Thomson Global Markets I/B/E/S.

Profit margins at the company's industrial operations were better than expected, analysts noted, with the energy and aviation units showing improvement.

"We anticipated total industrial margin to be weaker overall," wrote BernsteinResearch analyst Steven Winoker, in a note to clients.

Immelt also noted the prices its energy arm is able to charge for its equipment, particularly wind turbines, are stabilizing, which should boost profit margins.

"We see energy pricing stabilizing as we move through 2012 and into 2013," Immelt said.

LESS DEPENDENT ON EUROPE

GE is less dependent on Europe than rivals Siemens AG (SIEGn.DE) and Philips Electronics NV (PHG.AS), which earlier this month warned that the Eurozone debt crisis would hurt their results this year.

GE noted that its industrial revenue in emerging markets was up 25 percent in the quarter, with strong growth in Brazil, Russia, China and India.

GE kicked off a wave of earnings reports from big U.S. manufacturers, with blue-chip peers United Technologies Corp (UTX.N), Caterpillar Inc (CAT.N) and 3M Co (MMM.N) all due to follow suit over the next week.

"In December, GE indicated that it was managing Europe well. Now that's what is pointed to for the light revenue. I think that's kind of a weak excuse," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.

(Reporting By Scott Malone in Boston, additional reporting by Ryan Vlastelica, Chuck Mikolajczak and Nick Zieminski in New York; Editing by Tim Dobbyn, Derek Caney, Phil Berlowitz)

NCI shares nosedive on weak outlook

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The Reston, Virginia-based company, which caters to the U.S. federal government agencies, on Thursday said it expects revenue of $340 million to $360 million. Analysts on average were expecting $514 million, according to Thomson Global Markets I/B/E/S.

"A number of factors contributed to our bookings shortfall in 2011, including an unfavorable competitive environment, pricing pressures and delayed or cancelled procurements," President Brian Clark said in a statement.

Analysts at Wells Fargo said "NCIT's historic 'value' pricing for IT work is being under-cut by competitors, especially small businesses that have preferential bidding status." The analysts cut their rating on the company's stock to "underperform."

Shares of the company were down 30 percent at $8.00 in morning trading on the Nasdaq. They touched a low of $7.70 earlier in the session.

(Reporting by Rachana Khanzode in Bangalore; Editing by Maju Samuel)

Top Vulcan shareholder backs Martin Marietta deal

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Southeastern, which is also a top Martin Marietta shareholder, said in a letter filed with U.S. regulators on Friday that it strongly recommended the two companies resume talks.

Martin Marietta launched a hostile, nearly $5 billion bid to buy larger rival Vulcan in December, with the hope of building the world's largest producer of sand, gravel and other construction materials. Vulcan has rejected the offer.

"We understand that a higher offer from Martin Marietta will be necessary to complete a deal, and as Vulcan shareholders we support seeking a higher offer," Southeastern senior analyst Lowry Howell and general counsel Andrew McCaroll said in the letter.

Southeastern said that if Vulcan refuses to negotiate over the bid, it would vote for the slate of directors that Martin Marietta has nominated to Vulcan's board.

Vulcan shares rose 3.1 percent to $42.93 on the New York Stock Exchange on Friday afternoon.

(Reporting By Michael Erman; Editing by Steve Orlofsky)

Cogent shares slide after U.S. shuts Megaupload.com

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The government on Friday shut down the Megaupload.com content sharing website, charging its founders and several employees with massive copyright infringement, the latest skirmish in a high-profile battle against piracy of movies and music.

Cogent is an Internet services provider that caters to corporates, carriers, service providers and content providers in over 170 markets across North America and Europe.

In the indictment seen by Global Markets, the United States Department of Justice said Megaupload leases about 36 computer servers in Washington D.C. and France from Cogent.

Following the shutdown of Megaupload, FBI conducted a search of Cogent's computer systems at its Washington DC headquarters and took information, analysts said.

"If a server was to be needed or seized, that's within the scope of the warrant and we would make a determination in the next 24 hours or so if that was required," an FBI official told Global Markets.

"It's a very structured approach to go in, to do a slow roll on it, and to make sure that not only do we gain the evidence and protect the evidence but that we protect the interests of all parties concerned," the official said.

After Megaupload shut down, a more significant decline in Cogent traffic has occurred in the European market relative to the U.S. market suggesting that Cogent was a primary bandwidth provider for Megaupload in the European market, said FBR Capital Markets analyst David Dixon.

Privately held Carpathia Hosting was also named in the indictment for hosting Megaupload data.

Cogent did not respond to emails and telephone calls seeking comment.

"Megaupload paid Cogent an average of $1 million per month according to the indictment ... as a result, first-quarter revenue could decline sequentially," analyst Dixon said.

Megaupload has boasted of having more than 150 million registered users and 50 million daily visitors, according to the indictment. At one point, it was estimated to be the 13th most frequently visited website on the Internet.

Analyst Donna Jaegers at D.A. Davidson & Co said Megaupload could be bringing in 2 percent to 3 percent of revenue to Cogent.

"Cogent is a legitimate Internet connectivity provider. They have a lot of legitimate customers," analyst Jaegers said.

Cogent shares were trading down $2.88 at $15.93 on Friday on the Nasdaq.

(Reporting by Supantha Mukherjee, Himank Sharma and Rachana Khanzode in Bangalore; Jeremy Pelofsky in Washington)

Achillion shares fall on concerns over hep C drug's future

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On Thursday, investment website Seeking Alpha said the company was at a disadvantage as none of its hepatitis drugs in development were nucleosides.

While Brean Murray Carret analyst Brian Skorney felt the investor reaction was a fallout of the article, he didn't think the article was "fundamentally meaningful," or raised any new concerns.

Achillion's experimental hepatitis C drug, ACH-1625, is expected to compete with rival drugs from Vertex Pharmaceuticals Inc (VRTX.O) and Merck & Co (MRK.N), but must be taken with commercially manufactured interferon, and is seen facing a big threat from nucleotide drugs.

Most hepatitis C drugs used now are combination therapies, and these new drugs -- nucleosides -- could be a game changer for both patients and physicians.

Inhibitex (INHX.O), Pharmasset VRUS.O and Idenix (IDIX.O) are all developing a promising new type of hepatitis C medicine called nucleotide polymerase inhibitors, which work by targeting polymerase -- an enzyme essential for replication of the hepatitis C virus.

"The Seeking Alpha comment that Achillion's pipeline is a long shot could have had some negative effect. Also the stock has run up ... so some people are taking profit. Those are the potential possibilities," said William Blair & Co analyst Katherine Xu.

Since the beginning of the year, Achillion's stock has risen 39 percent, sparked by M&A activity in the hepatitis C treatment space.

"On the fundamental side, I don't think the company has changed anything since the last week," Xu added.

Shares of the New Haven, Connecticut-based company were down 9.5 percent at $9.54. They fell to a low of $9.40 earlier in the session. (Reporting by Shailesh Kuber in Bangalore; Editing by Editing by Sriraj Kalluvila)

FDA lifts hold on Insmed's lung disease drug

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The U.S. Food and Drug Administration lifted a clinical hold on the drug Arikace for treating non-tuberculous mycobacteria (NTM) lung disease, paving the way for the company to continue a mid-stage study.

The regulator had put the drug on clinical hold for treating NTM lung disease and cystic fibrosis (CF) based on an initial review of results from a long-term rat carcinogenicity study.

The FDA, however, retained the hold on the drug for the treatment of CF.

Wedbush Securities analyst Gregory Wade expects health regulators to lift the hold on cystic fibrosis as well in the next 2-3 months.

Wade said NTM lung disease could represent a $400 million market, a $100 million larger opportunity than CF.

The analyst expects Insmed to restart mid-stage trials for NTM lung disease in the first half of the year, and post results from the study in 2013.

The company said it would move ahead with the drug's 9-month dog inhalation toxicity study as previously requested by FDA, to determine if the findings of the rat inhalation carcinogenicity study are also observed in a non-rodent.

NTM are mycrobacteria widely found in the environment, particularly in wet regions, and its most common manifestation is lung disease.

CF is an inherited disease that affects about 30,000 people in the United States and about 70,000 worldwide. The drug would compete against Novartis' (NOVN.VX) Tobi and Gilead's (GILD.O) Cayston for the indication.

Insmed shares, which have lost about 55 percent of their value since the hold in August, were up 34 percent at $5.09 in midday trade, making them the top percentage gainers on the Nasdaq.

(Reporting by Balaji Sridharan in Bangalore; Editing by Sriraj Kalluvila, Viraj Nair)